WEBVTT - Surveillance: Rising Yields With Koesterich 0:00:05.120 --> 0:00:09.200 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane, along 0:00:09.240 --> 0:00:13.080 with Jonathan Ferrell and Lisa Brownwitz Jay Leye. We bring 0:00:13.119 --> 0:00:17.159 you insight from the best and economics, finance, investment, and 0:00:17.280 --> 0:00:23.360 international relations. Find Bloomberg Surveillance, an Apple podcast, Suncloud, Bloomberg 0:00:23.360 --> 0:00:30.160 dot Com and of course on the Bloomberg terminal. Let's 0:00:30.160 --> 0:00:33.400 bringing Rustco Strick now black Rock Global Allocation Fund portfolio 0:00:33.479 --> 0:00:35.560 manager Russell. Let's ask that question it's being asked in 0:00:35.600 --> 0:00:37.680 the ft here at Bloomberg and now swear as well. 0:00:37.840 --> 0:00:39.640 Do you think the events of the last week could 0:00:39.720 --> 0:00:42.920 lead to broader de leveraging in the hedge fund community. 0:00:43.240 --> 0:00:45.440 I think you you organ to see some people rethink 0:00:45.479 --> 0:00:47.080 their positioning. But look, I think there are a couple 0:00:47.120 --> 0:00:49.600 of things going on here apart from the question of 0:00:49.720 --> 0:00:53.200 leveraging derivatives. The first is we've known for many years 0:00:53.200 --> 0:00:56.040 that liquidity can be a challenge. A lot of that 0:00:56.080 --> 0:00:59.040 discussion was focused on the credit markets, and obviously it 0:00:59.120 --> 0:01:02.360 extends to equity markets as well. But the second part 0:01:02.360 --> 0:01:04.280 of this is really you know, you alluded to the 0:01:04.360 --> 0:01:06.959 calm on the surface, and I think that's true. What 0:01:07.120 --> 0:01:11.480 hasn't been remarked about is much is how much positions 0:01:11.560 --> 0:01:15.679 below the surface are being whipsawed these daily rotations where 0:01:15.720 --> 0:01:19.880 you see sectors and styles moving to three standard deviations 0:01:19.880 --> 0:01:23.120 in a day. Because investors flip back and forth between 0:01:23.200 --> 0:01:26.640 reopening trades uh in stay at home trades, that is 0:01:26.720 --> 0:01:29.679 also causing a lot of pain give on the wrong 0:01:29.720 --> 0:01:33.440 side of those moves, Russ. How do you synthesize a 0:01:33.640 --> 0:01:38.280 bloom economy into global allocation and for that matter, just 0:01:38.319 --> 0:01:41.560 trying to get the next Monday? How do you synthesize it? 0:01:41.640 --> 0:01:44.640 I'm gonna take hot seas over at Golden Sacks going 0:01:44.680 --> 0:01:47.520 out to a stunning ten percent plus statistic for Q 0:01:47.720 --> 0:01:51.120 two growth. You and I have never seen this. Um 0:01:51.680 --> 0:01:54.080 Rosenberg got a Carnegie email. In all the years he 0:01:54.200 --> 0:01:57.600 studied a temper guess what, he's never seen this? How 0:01:57.600 --> 0:02:02.120 do you frame your work in a boom mill you like? 0:02:02.280 --> 0:02:04.400 I think this is exactly the right question, probably the 0:02:04.400 --> 0:02:08.040 most important, because as you've said, very few living investors 0:02:08.040 --> 0:02:10.480 have ever seen this up to me, means a couple 0:02:10.520 --> 0:02:12.799 of things. One you were alluding to before the break, 0:02:13.120 --> 0:02:15.799 which is that rates are going to continue to normalize. 0:02:16.160 --> 0:02:18.639 It doesn't mean that they melt up forever. But it 0:02:18.800 --> 0:02:21.520 is very hard. I think Tommy, you nailed this before. 0:02:21.560 --> 0:02:26.480 To reconcile negative sixty bip real tenure yield and an 0:02:26.520 --> 0:02:31.080 economy that may grow seven eight uh in the back 0:02:31.120 --> 0:02:33.720 half of the year. One of those two things is wrong. 0:02:34.160 --> 0:02:36.960 We think rates continue to normalize. The other is a 0:02:37.000 --> 0:02:39.640 lot of investors were used to thinking only in terms 0:02:39.639 --> 0:02:42.840 of data, what's your market exposure? I think if you're 0:02:42.840 --> 0:02:46.079 gonna have an economy that's growing that fast, you also 0:02:46.080 --> 0:02:48.680 have to think in terms of your cyclical exposure. There 0:02:48.680 --> 0:02:51.200 are going to be parts of this economy companies that 0:02:51.240 --> 0:02:54.639 they're gonna see demand they've not seen in decades. Can 0:02:54.680 --> 0:02:57.720 you lever to those themes? Can you take advantage of 0:02:57.760 --> 0:03:01.919 that very fundamental change in a portfolio? Those are two things. 0:03:01.919 --> 0:03:04.320 We're focusing on. Our duration as the lowest that's been 0:03:04.320 --> 0:03:07.160 in years, and we're looking for ways to add cyclical 0:03:07.200 --> 0:03:10.919 exposure back into the portfolio. I know you're speaking metaphorically, 0:03:10.960 --> 0:03:14.520 Rusby said, how can we lever those cyclical themes in 0:03:14.639 --> 0:03:18.440 order to add exposure in your portfolio? There are people, however, 0:03:18.520 --> 0:03:20.880 who are taking this quite literally as we have learned, 0:03:20.960 --> 0:03:23.720 and they are leveraging up some of their positions. Yes, 0:03:23.840 --> 0:03:26.240 rates are normalizing, but there is a belief in the 0:03:26.240 --> 0:03:28.480 feed is adding to this that they are sitting on 0:03:28.520 --> 0:03:32.680 the front end. As we do see some push toward normalization. 0:03:32.760 --> 0:03:35.520 Are there more accidents waiting to happen like what we 0:03:35.640 --> 0:03:39.360 just saw. I think whenever you see an abrupt move, 0:03:39.520 --> 0:03:41.200 they are always going to be blow ups. They're going 0:03:41.240 --> 0:03:43.480 to be people that are over extended. You know, you've 0:03:43.480 --> 0:03:46.520 had a very strong bullmark, there's going to be concentration. 0:03:46.960 --> 0:03:49.760 The thing that I would watch is actually the rapidity 0:03:49.760 --> 0:03:52.240 of the move. You know, we we know this. We've 0:03:52.280 --> 0:03:54.680 seen that stocks and rates can move up together. A 0:03:54.720 --> 0:03:57.720 matter of fact, if you look at equities, equity multiples, 0:03:57.720 --> 0:04:00.240 and real rates, they tend to move up together for 0:04:00.280 --> 0:04:03.000 the obvious reason that as the economy gets better and 0:04:03.040 --> 0:04:06.880 companies gain operating leverage, earnings go up. What can trip 0:04:06.960 --> 0:04:09.960 up the market is the rapidity and more specifically the 0:04:10.040 --> 0:04:12.960 spike and bond market volatility. If you look at what's 0:04:12.960 --> 0:04:16.160 been happening the last three or four months, bond volatility 0:04:16.279 --> 0:04:20.039 has been increasingly moving with stock volatility. That's where I 0:04:20.040 --> 0:04:22.279 think the danger is if we get these days these 0:04:22.320 --> 0:04:26.520 weeks where yields back up this quickly. That unnerves investors, 0:04:26.560 --> 0:04:28.520 and that's when you tend to see some of these 0:04:28.520 --> 0:04:30.560 blow ups, Russ. Before we let you run. I caught 0:04:30.600 --> 0:04:33.760 up with Rick reader yesterday, just briefly, and he did 0:04:33.760 --> 0:04:35.520 not sound as bullish as he has done over the 0:04:35.560 --> 0:04:37.480 last several months. He was talking about a big cash 0:04:37.520 --> 0:04:40.840 allocation waiting for some volatility through the summer. You were 0:04:40.839 --> 0:04:42.440 all on the same page over a blank rock with 0:04:42.480 --> 0:04:45.159 that view. Well, I hope so Rick and port together 0:04:45.200 --> 0:04:48.960 we co manage the fund absolutely, we you know, so 0:04:49.080 --> 0:04:55.240 we we had been for the last five minutes. Delicately 0:04:55.400 --> 0:04:58.039 you sounded like a rig walk me throw it, Russ. 0:04:58.560 --> 0:05:01.480 We we've been doing exactly what's been described, which is, look, 0:05:01.560 --> 0:05:05.520 the fundamentals are strong with the cyclical recovery, stocks are 0:05:05.560 --> 0:05:07.719 likely to end the year higher. But we are looking 0:05:07.760 --> 0:05:09.920 at a chop your market. So what have we done. 0:05:09.920 --> 0:05:12.240 We've done a couple of things. We have trimmed our 0:05:12.240 --> 0:05:16.320 equity exposure, and we have brought the duration way way down. 0:05:16.320 --> 0:05:19.400 As I spoke about a moment ago, instead rather than 0:05:19.400 --> 0:05:22.320 looking it bonds for that hedge in your portfolio. Is 0:05:22.400 --> 0:05:25.560 Rick described, We've been building up cash. Having that dry powder, 0:05:25.680 --> 0:05:29.159 there will be opportunities to reinvest. Not trying to cause trouble. Rus. 0:05:29.279 --> 0:05:34.840 You know that took that black Rock global allocation of 0:05:34.960 --> 0:05:43.480 fun portfolio manage it. Okay, here's what we're gonna do, folks, 0:05:43.480 --> 0:05:46.480 And this is important for Global, Wall Street and everybody 0:05:46.520 --> 0:05:49.440 else on radio and TV. Why don't we find someone 0:05:49.520 --> 0:05:53.680 out there totally removed from the madness of margin calls 0:05:53.720 --> 0:05:56.680 and excess leverage. James Spevan would be a candidate with 0:05:56.760 --> 0:05:59.640 c c L a chief investment officer. He has been 0:06:00.080 --> 0:06:04.200 running sober money for decades and he joins us today. James, 0:06:04.200 --> 0:06:06.080 I'm not going to waste your time with the margin 0:06:06.160 --> 0:06:09.039 car discussion and that what I am going to say 0:06:09.080 --> 0:06:12.000 to you is, how do you operate in this mill? You? 0:06:12.240 --> 0:06:15.760 What do you actually do when you've got big banks 0:06:15.800 --> 0:06:20.359 bouncing off of big losses. What I observe, Tom, is 0:06:20.400 --> 0:06:23.359 that we are indeed going to get excellent economic growth 0:06:23.400 --> 0:06:27.479 figures for April and may significantly on the back of 0:06:27.560 --> 0:06:31.799 the actions Biden administration and not least four hundred dollars 0:06:32.040 --> 0:06:36.160 posted out to the eligible persons. And I think that 0:06:36.200 --> 0:06:38.240 therefore we will see something in the order of a 0:06:38.320 --> 0:06:40.840 hundred and eighty dollars of earnings to the S and 0:06:40.880 --> 0:06:44.600 P five hundred in the current calendar, rising to two 0:06:44.680 --> 0:06:48.440 hundred dollars next year, and of course, baked into the 0:06:48.480 --> 0:06:51.240 cake of those numbers is a premise that companies are 0:06:51.240 --> 0:06:56.200 going to invest in capital that improves productivity and allows 0:06:56.279 --> 0:07:00.800 margins to stay elevators. And given element that one might 0:07:00.839 --> 0:07:04.120 observe for inflation and money rates, I think that justifies 0:07:04.160 --> 0:07:06.960 the year end target for the SMP five hundred this 0:07:07.040 --> 0:07:11.920 year of points rising to hundred points next year. And 0:07:12.280 --> 0:07:14.640 if there is a real risk, I think it is 0:07:14.720 --> 0:07:19.440 twofold one that the Federal Reserve continues to argue that 0:07:19.480 --> 0:07:22.160 it doesn't need to change rates, but the bond market 0:07:22.200 --> 0:07:28.120 therefore does the work for quilling inflation. That leads to 0:07:28.360 --> 0:07:33.480 a dislocation between bond deals and equity prices and inevitably 0:07:33.760 --> 0:07:36.120 leads to a correction. The other risk, which I think 0:07:36.200 --> 0:07:39.240 is just as real, is that a large chunk of 0:07:39.240 --> 0:07:41.800 the fourteen hundred dollars that has been posted out is 0:07:41.840 --> 0:07:44.640 applying to the empty markets. We get them melt up 0:07:44.840 --> 0:07:48.440 during May and early June, and that's the point where 0:07:48.480 --> 0:07:51.840 we should take money off the table James optimal reopening 0:07:51.880 --> 0:07:55.560 quite then, what is it for me? It's the world 0:07:55.640 --> 0:07:58.880 class banks that operate in the United States, so JP 0:07:59.000 --> 0:08:01.960 Morgan and Bank America. Seems to me that they have 0:08:02.120 --> 0:08:08.040 ample opportunity to lend sensibly into an accelerating market. They 0:08:08.080 --> 0:08:11.440 have excellent loan criteria. I don't think they're going to 0:08:11.520 --> 0:08:15.600 trip up, but they will be significant participants in economic recovery. 0:08:15.800 --> 0:08:18.600 The other big trade I think is shifting from consumer 0:08:18.680 --> 0:08:21.960 staples to consumer discretionary, which is a very obvious trade. 0:08:22.120 --> 0:08:24.440 But I'm surprised when I look at the portfolios of 0:08:24.640 --> 0:08:27.120 fund managers in the marketplace. I hope you have yet 0:08:27.160 --> 0:08:30.080 to really make that switch. I gotta say, it does 0:08:30.160 --> 0:08:32.959 sound like there's some subtext there when you say your 0:08:33.000 --> 0:08:35.880 favoring banks that lend sensibly, and then you talk about 0:08:35.920 --> 0:08:38.199 JPMorgan and Bank of America to the banks that were 0:08:38.200 --> 0:08:41.280 someone immune from the recent blow up of our keegos. 0:08:41.320 --> 0:08:45.120 Are you saying away from other banks, from perhaps European 0:08:45.160 --> 0:08:49.160 banks or Japanese banks they got embroiled in this issue, 0:08:49.720 --> 0:08:52.480 or do you see them also as potentially holding value 0:08:52.480 --> 0:08:55.920 as the yield curve steepens. Now I am absolutely staying 0:08:55.960 --> 0:08:59.280 out of those areas. I worry that the European banks 0:08:59.520 --> 0:09:02.920 face perfect storm of continuing negative rates. And after all, 0:09:02.920 --> 0:09:06.080 what one thinks about how the European central banks Target 0:09:06.200 --> 0:09:10.680 two system operates. Unlike the federal reserve arrangements in the States, 0:09:10.679 --> 0:09:14.559 where the regional central banks to zero the inter bank balances, 0:09:14.600 --> 0:09:19.600 there are huge imbalances within the euro system. Germany has 0:09:19.640 --> 0:09:23.160 to lend huge sums into the Target two system. Buller's 0:09:23.160 --> 0:09:26.160 Bank then calls the commercial banks to provide capital, and 0:09:26.160 --> 0:09:28.520 having asked the capital, then sends from the bill because 0:09:28.520 --> 0:09:31.720 of negative interest rates. No surprise, the European banks are 0:09:31.720 --> 0:09:34.240 in real trouble. And I would observe that the French 0:09:34.280 --> 0:09:37.200 banks have been pulling back in lending into Asia. That 0:09:37.280 --> 0:09:39.680 strikes me as a real sign the French banks are 0:09:39.720 --> 0:09:42.120 gain to be in relative trouble. You want you to 0:09:42.160 --> 0:09:44.920 look outside the States. I think the most interesting area 0:09:44.960 --> 0:09:47.760 is India, where I see an accelerating economy, I see 0:09:47.760 --> 0:09:51.679 a reasonably well run banking system. Names like HFC I 0:09:51.720 --> 0:09:54.679 think absolutely stand out for consideration. James are going to 0:09:54.760 --> 0:09:56.240 jump in just to bring a break in news, just 0:09:56.320 --> 0:09:59.640 quickly Germany to reassess the actress Nika vaccine after more 0:10:00.040 --> 0:10:04.040 thrombosis cases. Tom this just speaks a divide between the 0:10:04.120 --> 0:10:06.760 United States and Europe right now. Just to compare and 0:10:06.800 --> 0:10:09.400 contrast to the last twenty four hours, President Biden talking 0:10:09.440 --> 0:10:13.000 about making the vaccine eligible for all adults in America 0:10:13.600 --> 0:10:15.360 of adults by the middle of next month, and here's 0:10:15.400 --> 0:10:19.199 Europe grappling still with the Astrosennaka vaccine to reassess the 0:10:19.200 --> 0:10:23.439 Astrosennacha vaccine in Germany after more thrombosis cases. That headline 0:10:23.480 --> 0:10:26.959 just crossing a Bloomberg Canada yesterday with much the same treatment. 0:10:26.960 --> 0:10:30.600 I'm not saying equivalent treatment, but certainly, John, it's a trend. James, 0:10:30.600 --> 0:10:32.959 how on earth do you stay long Europe in any way, 0:10:32.960 --> 0:10:35.240 shape or form with this going on in the background. 0:10:36.200 --> 0:10:38.800 I think it's extremely difficult to be positive about the 0:10:38.840 --> 0:10:42.520 outlook for the European economy. Justical policy is a mess. 0:10:42.840 --> 0:10:46.080 I think that there are real tensions within the euro system. 0:10:46.160 --> 0:10:48.280 If you asked me to talk about a country that 0:10:48.440 --> 0:10:52.120 is worth considering, it would be Italy. I do that 0:10:52.160 --> 0:10:55.320 there are political shifts in Italy to be positive for 0:10:55.320 --> 0:10:57.800 the long term. Equally, when I think about the sources 0:10:57.840 --> 0:11:00.760 of European companies that I would favor. It is the 0:11:00.800 --> 0:11:03.280 giants that are capable of making money like oh VMH, 0:11:03.480 --> 0:11:06.280 which I think remain extremely well run, and m Katy 0:11:06.400 --> 0:11:09.439 should be from my perspective, long term pool holdings of 0:11:09.520 --> 0:11:12.840 a growth focused portfolio. James, thank you as always. Let's 0:11:12.840 --> 0:11:14.839 get back to that news. James Bavin c c L 0:11:14.880 --> 0:11:24.160 A chief investment officer. Right now, Gregory Meeks joins us. 0:11:24.160 --> 0:11:26.680 He is a Democrat, he is from New York. This 0:11:26.760 --> 0:11:29.760 could be a two hour conversation because of his perspective 0:11:30.080 --> 0:11:33.280 on foreign affairs and his perspective as a congressman from 0:11:33.320 --> 0:11:36.600 John Fitzgerald Kennedy Airport in New York, the fifth District 0:11:36.600 --> 0:11:39.760 in New York. And we welcome to Congressman back again. 0:11:40.160 --> 0:11:44.320 Carruson Meeks. On infrastructure, I got good news. New Jersey's 0:11:44.360 --> 0:11:46.360 worse than New York. That's all we need to know. 0:11:46.840 --> 0:11:49.400 New York is doing fine right now by any civil 0:11:49.440 --> 0:11:52.640 engineering study. But you know, when you get off the 0:11:52.679 --> 0:11:56.000 plane in New York, at Laguardi, at JFK, anywhere else, 0:11:56.480 --> 0:11:58.560 there's a lot of roads that are troubled, a lot 0:11:58.640 --> 0:12:01.800 of bridges troubled. Some four hundred bridges in New York 0:12:01.880 --> 0:12:04.719 State or a hundred years older more. How do we 0:12:04.800 --> 0:12:08.520 fix it this with this new infrastructure bill? What's different 0:12:08.760 --> 0:12:12.679 this time? Right now? I think that this time we're 0:12:12.720 --> 0:12:16.800 going to get something done. Um. I think that you know, 0:12:16.840 --> 0:12:20.760 if you talk to Democrats and Republicans, I believe they 0:12:20.880 --> 0:12:23.959 understand that if you look at our crumbling infrastructure, like 0:12:24.000 --> 0:12:25.640 you said, not only in the city of New York, 0:12:25.640 --> 0:12:28.640 but across this nation, that we've got to invest in it. 0:12:28.640 --> 0:12:31.320 It's just the same as you know, those of us 0:12:31.360 --> 0:12:34.040 who you know workn't let their own homes. You've got 0:12:34.080 --> 0:12:36.400 to invest in your home to keep it up. Otherwise 0:12:36.480 --> 0:12:39.360 it will crumble down no matter how well it was built. 0:12:40.200 --> 0:12:42.600 But if it was built fifty sixty years ago, like 0:12:42.640 --> 0:12:46.520 our infrastructure, uh, it deteriorates. And therefore that you've got 0:12:46.520 --> 0:12:48.679 to invest in it. And if you invest in it, 0:12:49.120 --> 0:12:52.839 then that makes it profitable for everybody that will utilize it, 0:12:52.880 --> 0:12:56.080 because everyone will utilize that infrastructure. Can we do this 0:12:56.280 --> 0:13:00.240 with bond financing of the maturity and lengths of our 0:13:00.280 --> 0:13:03.240 new bridges, our new roads, and indeed a new terminal 0:13:03.320 --> 0:13:06.920 of JFK. Why can't we just finance this out thirty 0:13:07.440 --> 0:13:11.800 fifty even dare I say seventy years. Well, I think 0:13:11.840 --> 0:13:13.559 that what we need to do it is a combination 0:13:13.600 --> 0:13:15.920 of all It's gonna take a little bit of everything 0:13:16.000 --> 0:13:18.040 from everybody. That's why I'm a firm believer in these 0:13:18.480 --> 0:13:22.520 a number of public private partnerships. So as I look at, 0:13:22.559 --> 0:13:26.120 for example, of what we're doing at JFK Airport, UH, 0:13:26.200 --> 0:13:29.520 there needs to be there some government investment in it, UH, 0:13:29.559 --> 0:13:31.400 and we're fighting to get that. I tried to get 0:13:31.440 --> 0:13:34.000 some of it in UH because as the result of 0:13:34.040 --> 0:13:37.280 the pandemic. Of course, you look at the revenue that 0:13:37.360 --> 0:13:39.960 was at the Kennedy Airport, it went down tremendously, So 0:13:40.080 --> 0:13:43.760 government should help EDIT. But also we've had private industry 0:13:43.800 --> 0:13:47.200 that's investing in it, so we need some sacrifice from them. 0:13:47.440 --> 0:13:50.840 And that's why we extended the lease on the airport, 0:13:51.120 --> 0:13:53.199 so that there's a long return for them to get 0:13:53.200 --> 0:13:55.080 a return on their investment for the morning that they 0:13:55.120 --> 0:13:57.880 will be putting into it. Also, so you're getting money 0:13:57.920 --> 0:14:00.720 from both sides in that regards is fair to the 0:14:00.760 --> 0:14:04.880 taxpayers and it's fair to the private investors. Also, Congressman, 0:14:04.880 --> 0:14:06.400 you wear many hats, and I want to turn to 0:14:06.440 --> 0:14:09.880 a delicate question about foreign policy, if I made companies 0:14:09.880 --> 0:14:12.600 are getting very much entangled with what is handling in China, 0:14:12.720 --> 0:14:15.880 very much around the colin situation in Shinjang. And I 0:14:15.920 --> 0:14:19.080 wonder from your perspective whether you think that US based 0:14:19.080 --> 0:14:24.120 companies should face a band of using cortinado Shinjang. Well, 0:14:24.160 --> 0:14:26.080 here's what I think, you know, and I don't think 0:14:26.120 --> 0:14:28.360 I think that what we should do. Uh And as 0:14:28.400 --> 0:14:31.240 I believe there's are foreign affairs and work in multidagard ways. 0:14:31.640 --> 0:14:36.000 So I was a strong support, a strong supporter for example, 0:14:36.000 --> 0:14:37.520 And here's what I think that we made a mistake. 0:14:38.000 --> 0:14:42.440 I was a strong supporter and TPP working with other 0:14:42.520 --> 0:14:46.080 countries to make sure that the rules were leveled and 0:14:46.160 --> 0:14:49.840 to instead of isolating ourselves, make sure that we all 0:14:49.880 --> 0:14:52.520 are playing by the China doesn't played by those same rules. 0:14:52.840 --> 0:14:55.920 Then China would be isolated. And so when they are 0:14:56.000 --> 0:15:00.160 playing with certain products, particularly when you talk about the 0:15:01.520 --> 0:15:04.640 type of product that you just mentioned and chips, et cetera, 0:15:05.160 --> 0:15:11.800 that um um it is us who believe in you know, 0:15:12.080 --> 0:15:14.160 I'm a firm believing the w t L and others, 0:15:14.160 --> 0:15:17.080 and we need to enforce those laws and rules, and 0:15:17.480 --> 0:15:21.240 China who's violating though uh and so opposed the just 0:15:21.240 --> 0:15:25.360 just the United States by ourselves, we're not an effective, 0:15:25.360 --> 0:15:27.160 but it was the United States and our friends and 0:15:27.200 --> 0:15:30.640 the EU and our other doing it collectively. Now you're 0:15:30.720 --> 0:15:33.320 having something that is really going to have effect on 0:15:33.400 --> 0:15:35.960 Taylor the congressman right now already And forgive me for 0:15:36.040 --> 0:15:38.960 jumping in if I may u s fake companies are 0:15:39.000 --> 0:15:42.280 already facing potentially a boy card in the mainland right 0:15:42.280 --> 0:15:44.880 now that will hurt their revenues, their profits, and to 0:15:44.960 --> 0:15:47.440 get in line with the policy of the United States, 0:15:47.480 --> 0:15:49.640 you need to get these multinationals on board. And we've 0:15:49.640 --> 0:15:51.480 seen that repeatedly not work out. We saw it with 0:15:51.520 --> 0:15:53.800 the Walt Disney Company last year in the production of Mulan, 0:15:54.160 --> 0:15:56.280 and we're seeing it with Nike right now, who are 0:15:56.320 --> 0:15:58.960 trying to avoid using colin from Shinjiang, along with other 0:15:59.200 --> 0:16:02.400 multinationals too, and they face a boycott on the mainland. 0:16:02.400 --> 0:16:04.920 How do you offer them cover to make the decision 0:16:04.920 --> 0:16:08.520 that would be in line with your administration. Well, the 0:16:08.560 --> 0:16:12.080 way to know you offer them cover is that if 0:16:12.080 --> 0:16:15.760 they work collectively together, we can reverse it. And we 0:16:15.800 --> 0:16:18.720 could reverse I know that they know China is doing 0:16:18.760 --> 0:16:21.120 what it's doing because they think that they would put 0:16:21.200 --> 0:16:25.920 pressure on us in that regards and isolate us. Uh. 0:16:25.960 --> 0:16:29.960 So the way that you change that is working with 0:16:30.000 --> 0:16:33.800 the multi naturals collectively, putting them all together, figuring out 0:16:33.880 --> 0:16:35.960 how we can work together to the their issues in 0:16:36.080 --> 0:16:39.120 their in their concerns or resolved, and then putting that 0:16:39.200 --> 0:16:43.400 proposition versus China. But they want to be there, sir, 0:16:44.000 --> 0:16:46.800 That's ultimately the problem. They want to be there. They 0:16:46.800 --> 0:16:49.480 want to strandle that fine line between pleasing you and 0:16:49.520 --> 0:16:51.760 a progressive consumer base in the United States, and they 0:16:51.800 --> 0:16:54.480 want a presence in China at the same time. So 0:16:54.480 --> 0:16:56.040 I have to come back to the previous question. Is 0:16:56.040 --> 0:16:59.240 it something you would consider banning these companies and making 0:16:59.280 --> 0:17:01.640 the decision for all them fanning them from using Carton 0:17:01.680 --> 0:17:04.720 from that region. See, I don't like to use the 0:17:04.760 --> 0:17:07.680 word banging. I'd like to use the word working collective together. 0:17:08.160 --> 0:17:10.200 And and that means that you can come to a 0:17:10.280 --> 0:17:14.400 resolution collectively, you know, understanding they all have the same 0:17:14.440 --> 0:17:17.480 business interests. I don't want them to to to to 0:17:17.480 --> 0:17:21.280 to damage uh their business interests that they have UH 0:17:21.320 --> 0:17:23.680 in China. I want China to be able to. You know, 0:17:23.880 --> 0:17:25.840 one of the things is to open up their markets 0:17:26.200 --> 0:17:29.320 in regards to our companies so that we can compete globally, 0:17:30.560 --> 0:17:33.760 just as China competes. And we have an open economy 0:17:33.800 --> 0:17:37.360 here in the United States, and that's equitable. And that's 0:17:37.400 --> 0:17:39.359 what training is all about, that's what that's how you 0:17:39.400 --> 0:17:45.679 work both national multinational corporations. So in my estimation, what 0:17:45.760 --> 0:17:49.439 we wanna do is um is uh talk to our 0:17:49.520 --> 0:17:53.879 multinationals and let them know that it is important for 0:17:53.920 --> 0:17:57.400 them to work collected together in the long haul, all 0:17:57.440 --> 0:17:59.720 of us in the long run if we work in 0:17:59.800 --> 0:18:02.960 that and and that's in that cooperation. Congressman, is a 0:18:03.000 --> 0:18:05.399 really dedicate issue right now, and I appreciate your input 0:18:05.480 --> 0:18:07.000 on the subject. I'd love to catch up with you 0:18:07.000 --> 0:18:09.919 against soon on it to Commeressman. Thank you, Congressman Gregory 0:18:09.960 --> 0:18:18.840 makes that a Democrat from New York. It is the 0:18:18.880 --> 0:18:21.399 micro day that leads to the macro call. And Ethan 0:18:21.440 --> 0:18:24.000 Harris joins us right now, expert at the macro call, 0:18:24.080 --> 0:18:27.480 but using the resources of his Bank of America where 0:18:27.520 --> 0:18:30.560 he's head of Global Economics. Ethan, what I do is 0:18:30.600 --> 0:18:32.919 I look at the parlor game of one year guests 0:18:33.240 --> 0:18:36.359 or two year guests, and I take it considered Ethan 0:18:36.400 --> 0:18:39.880 Harris average, that's what Michelle Meyer does, and I come 0:18:39.880 --> 0:18:43.240 out with a Chinese economy. You guys have six and 0:18:43.280 --> 0:18:48.080 a quarter percent economic growth spread out over twenty four months. 0:18:48.600 --> 0:18:52.680 That is a Chinese equivalent economy. How will America and 0:18:52.800 --> 0:18:55.840 adapt and adjust to this? If we have an economy 0:18:55.960 --> 0:19:00.439 that's not structured like China, Well, we can grow at 0:19:00.440 --> 0:19:04.040 that pace indefinitely. I mean, this is just a huge 0:19:04.840 --> 0:19:09.080 fiscally fueled recovery, fastest recovery in history for the US 0:19:09.119 --> 0:19:12.560 ecomy in the next two years. Um. And eventually we 0:19:12.600 --> 0:19:16.240 have to slow down and so uh, you know by 0:19:16.280 --> 0:19:19.000 the time we get to two thousand twenty three, Uh, 0:19:19.040 --> 0:19:20.920 there's gonna have to be some changes here. The FED 0:19:21.040 --> 0:19:23.440 is gonna have to pull back a bit. We can't 0:19:23.440 --> 0:19:26.720 really afford to continue to do trillion dollar fiscal packages 0:19:26.800 --> 0:19:30.080 every year. Um. We can't grow at Chinese rates. We 0:19:30.119 --> 0:19:33.800 don't have the the population, we don't have the catching 0:19:33.840 --> 0:19:37.439 up to do a new technology that China has. But 0:19:37.560 --> 0:19:40.520 we can get to really robust years in a row. Ethan. 0:19:40.520 --> 0:19:42.720 I've been looking at the account spending data that you 0:19:42.800 --> 0:19:46.040 produce in your repulse, And I just wanted for you one, 0:19:46.080 --> 0:19:47.960 what are you seeing right now? And so how useful 0:19:47.960 --> 0:19:50.119 has that been just to have every twist and turn 0:19:50.560 --> 0:19:54.120 spout out for you guys just ahead of time. Yeah, 0:19:54.200 --> 0:19:56.440 I mean, we aggregate the data, so obviously we don't 0:19:56.440 --> 0:20:00.320 know anything about the individuals involved in this data, um, 0:20:00.400 --> 0:20:04.520 and we we gets turned out to correlate quite well 0:20:04.560 --> 0:20:08.120 with turns and spending. And it's particularly interesting to look 0:20:08.160 --> 0:20:10.480 at the spending behavior when you can match it up 0:20:10.520 --> 0:20:14.879 to policy changes like the rollout of stimulus checks and 0:20:14.920 --> 0:20:18.320 how that impacted households who got those checks. Um. And 0:20:18.359 --> 0:20:21.840 what you found was that the stimulus checks really boosted 0:20:21.880 --> 0:20:25.639 spending a lot, and it's one of the factors that 0:20:25.760 --> 0:20:30.000 convinced us to get even higher above consensus on growth 0:20:30.119 --> 0:20:33.840 with consumer spending. We think in the UH the start 0:20:33.840 --> 0:20:38.520 of the year at almost twelve percent annualized rates. So 0:20:39.240 --> 0:20:42.080 the stimulus check really have put a lot of caffeine 0:20:42.119 --> 0:20:44.840 into the economy. Unreal numbers, Ethan, Just forgive me, just 0:20:44.840 --> 0:20:46.200 give me a couple of minutes and I'll go through 0:20:46.240 --> 0:20:48.320 some of your research for our audience. Least look at 0:20:48.320 --> 0:20:51.040 this seven days ending mass. Now you can do the 0:20:51.119 --> 0:20:52.400 year over year and you can look at the base 0:20:52.440 --> 0:20:54.359 effects and we're up forty pc. But just look at 0:20:54.400 --> 0:20:59.879 ten the last two years nineteen or rather into twentys 0:21:00.080 --> 0:21:03.760 is twenty one. Right now we're up on a two 0:21:03.840 --> 0:21:06.720 year basis for retouth souths. Looking at the credit spec 0:21:06.800 --> 0:21:08.720 con spending that we got down to bank for America, 0:21:08.760 --> 0:21:11.240 it's not a huge But when do we move from 0:21:11.240 --> 0:21:14.680 recovery and just making up the lost ground into something 0:21:14.880 --> 0:21:18.679 more sustainable and that something that has perhaps longer legs 0:21:18.920 --> 0:21:22.280 adding to employment, adding to inflation over the longer term 0:21:22.280 --> 0:21:24.600 and ethan, it seems like the consensus is this is 0:21:24.640 --> 0:21:27.080 a momentary blip. Morgan Stanley is saying it will burn 0:21:27.200 --> 0:21:29.880 hot and it'll burn short. Do you agree, or their 0:21:29.960 --> 0:21:32.520 longer lasting legs from all of this spending that could 0:21:32.520 --> 0:21:35.320 bleed into a faster economy for an even longer period 0:21:35.359 --> 0:21:38.480 of time. Well, I mean it is true that that 0:21:38.480 --> 0:21:41.000 that we're not going to grow at twelve percent every 0:21:41.080 --> 0:21:45.040 quarter going forward, but the fade and growth is not 0:21:45.080 --> 0:21:47.399 going to be that dramatic. Were we think by the 0:21:47.480 --> 0:21:50.040 end of next year will be growing four percent instead 0:21:50.080 --> 0:21:53.120 of twelve percent. That's still a great number. By historic 0:21:53.119 --> 0:21:55.639